F. Scott Fitzgerald once said there are no second acts in American lives. However, after having spent 20 years in the IT industry, serving in various roles from system administration to network engineer (10 of which have been in education), I’ve recently decided that my second act should be as a freelance writer covering the investor's view of the technology industry. My background in engineering gave me what I consider strong analytical skills. My 15 years of trading and investing gives me the experience to assess equities and appraise their value. I am a Warren Buffett disciple that bases investment decisions on the quality of a company's management, its growth prospects, return on equity and price-to-earnings ratio. I employ conservative strategies to increase capital while also keeping a watchful eye on macro-economic events to mitigate downside risk.

Why HP Should Fire Meg Whitman And Hire Scott Forstall

The current two dimensional HP logo used on corporate documents, letterheads, etc. (Photo credit: Wikipedia)

Scrutiny, belatedly so, is the best thing that will come out of Hewlett-Packard’s embarrassing Autonomy deal. The company’s recent string of self-inflicted wounds will be studied for quite some time in business schools everywhere. I would imagine that as young aspiring CEOs walk into the class, university professors will have already written on the board “Hewlett-Packard: Just When You Think Things Can’t Get Any Worse.”

I blasted the company for its failure to stand behind former CEO Marc Hurd for some “indiscretions,” but this time I think the company should act quickly and dismiss Meg Whitman because that’s what good companies do over execution failures. On Tuesday reports surfaced that Apple fired Maps manager Richard Williamson, the person deemed responsible for the “map-gate” situation with the iPhone 5. Likewise, Intel recently ousted its CEO Paul Otellini, albeit two years too late, for the company’s inability to adapt to the proliferation of smartphones and tablets. As much as Otellini is respected, he was too closely tied to the PC age, now in its decline. The mobile movement has caused rivals such as Qualcomm and ARM Holdings to dominate the space.

If you need a reminder that a change at the top can help, check out the resurgence that Yahoo has seen since hiring Marrisa Mayer. It’s still early days, but so far it the speed with which Yahoo has acquired credibility with investors has been nothing short of remarkable. Much like HP, Yahoo has had its own share of failures at the CEO turnstile but with Mayer at the helm, Yahoo now seen as fresh and new and the stock price has made hew highs with no meaningful signs of slowing down.

What Forstall Will Bring

On the heels of the Autonomy scandal, HP needs a new direction. The company has no choice but to get rid of Whitman. Her replacement should be Scott Forstall, Apple’s former Senior Vice President of IOS. Forstall will ignite HP like it has never seen before. What’s more, he will help HP compete more effectively with Apple – for no other reason than the fact that he wants revenge. I don’t think he needs more motivation than this.

Forstall would immediately stop the hemorrhaging in both the company’s market shares and its stock price. In my opinion, his first course of action would be to reinvigorate HP’s WebOS business and figure out a way to make it a respectable name in mobile. After all, if Research in Motion can spend almost two years developing BB10, should it be that outrageous to expect WebOS to revitalize HP? RIM’s stock price has surged over 50% on the anticipated launch alone.

Forstall can then figure out if WebOS should become proprietary as with Apple’s IOS or should it be licensed to device makers as with Android? This will become a sensitive issue since HP will immediately become a competitor to its OEM partner in Microsoft - but so what. Microsoft didn’t ask HP’s permission when it entered hardware with its Surface tablet – essentially saying “it is now every man for himself.” I doubt that it is in Forstall’s character to even care.

HP will then become better positioned to compete with other PC manufacturers such as Dell and Lenovo. What’s more, the company will also create additional enterprise and consumer leverage against hated rivals in Oracle and Cisco.

For now, shares of HP still look undervalued. But absent some clear direction of where the company is going I don’t have any confidence that Whitman and the rest of the management team can realize any value that is left in the company. Forstall is a hire that HP has to make if the company truly cares about its future and its investors.

Post Your Comment

Post Your Reply

Forbes writers have the ability to call out member comments they find particularly interesting. Called-out comments are highlighted across the Forbes network. You'll be notified if your comment is called out.

Comments

Rich, meg took the reins only to find out that Autonomy had not disclosed Interwoven has been stealing IP belonging to VCSY. lynch thought it would never be found out and WEB OS could continue moving forward. Interwoven forced the patents through re-exam only to emerge even stronger. See 744/629 patents vcsy vs Interwoven. A settlement conference has been scheduled. Meg should settle with vcsy and move forward with web os and then deal with the fraud she was not aware of with Autonomy. Read up………Paul

I can also ask if you’ve ever met Forstall. But also wasn’t Whitman involved in the previous CEO hirings since she said on the board. Plus as a board member she voted yes for the Autonomy deal. Should she not share some of the responsibility?

The underlying thesis of this blog posting – replace Meg with Scott – is a little misleading. Scott might be a great engineering leader…that doesn’t make him qualified to run a mega-corporation with several declining business units in the middle of multiple mega-trend shifts (Mobile, Social, Cloud, SaaS, Digital and Big Data). HP needs a fast growth category leader product that can drag it out of this mess. Scott can helpful there.

What Meg is doing… tinkering around the edges and streamlining the core is necessary but not sufficient. Also jumping from strategy to strategy is going to destroy employee morale and sap energy. HP was trying to be a fast follower around IBM’s strategy… take the Big Data trend and wrap services around this – analytics, etc.

They need to stick to this Big Data strategy and focus on out-executing IBM and Dell. The trend is their friend…. Data will double every year for the forseeable future. They have all the ingredients to help corporations with their Data problems. Not sure why they are unable to articulate this vision. They need a new marketing and PR firm for sure.

By mentioning Marissa Mayer I think you actually prove my point. Yahoo is a tiny little internet company with a well know name. How tiny? The parts of Research in Motion other than the selling of the Blackberry phone, generate as much revenue as Yahoo. That tiny.

When you continue to cite non-facts as facts (Otellini ousted from Intel, rather a surprise resignation) your arguments become mere propaganda and your credibility is shot.

Also, RIMM is not a success story.

“Forstall would immediately stop the hemorrhaging that has been in both the company’s market shares and its stock price…” Whoa. Let’s just stop right there because again you are overreaching. But it is nice that you took a practically unarguable position. There is not much chance that HP share price can go lower. So you are probably right on that.

Something is needed at HP but it is not another executive. Meg needs to be given time to turn HP around, as she is doing, and let the turnaround work. Just as Carly’s Compaq call was ultimately right and Hurd’s leadership should have been given the benefit of the doubt, give Meg a chance.

Steve, your points are valid with regards to Whitman. But I worry that a talent like Fortstall will slip away. Plus I can’t entirely dismiss that Whitman approved the the deal for Autonomy while she was a board member. Also, I never said that RIMM was a success story. I only talked about what the stock price has done since the announced release of BB10.

Revolving CEOs are exactly the problem at HP, replacing another one will not help. I have worked for HP for over 25 years and none were as bad as the Mark Hurd Years. He devastated this company and there is still a lot of damage that needs to be repaired. He was the cause of the EDS write-down because he failed to integrate them into HP. Leo continued to destroy the company with his ridiculous decisions dumping tablets, phones and WebOS. He managed to do this in only 11 months! So, you think we should hire another guy that got fired at another tech company…wait doesn’t that sound like what happened with Leo? The HP board has definitely made some mis-steps, but most of the people who did that are now gone. Meg is trying to repair the damage of the last 3 CEOs and that will take time in a large company like HP. She has the support of the workers and the workers are THE ONLY asset that matters at a technology company. HP needs to stay the course and give Meg the 5-years she has asked for to turn things around. After that HP will either be a thriving company again or it will be split up and sold off at auction, but changing direction again at this stage will surely mean the death of a technology icon.

I guess you would have to specify which mistake: Mark Hurd did more damage to HP than anyone. He destroyed morale, he ran off many of the good people, he under-invested in R&D, all for short-term gain and all the while pocketing $40 million a year. Anyone could have done what he did because all he did was cut-cut-cut. He is the most evil person on the planet. Yet, wall street loved him for his short-term thinking. Short-term does keep a stock price high but it destroys a company. I think Leo really wanted to turn HP around but he was not up to the task and didn’t take time to understand the company. HP now has a CEO with enough courage to tell wall street that we are in this for the long haul and it will take time to turn around the mess that Mark and Leo have caused. So, please explain to me which mistake you are talking about and how changing CEOs AGAIN will offer any kind of stability.

HP certainly does need advice from “news contributors” …. writing articles and running a diversified product company like HP are two different things.. The problems Meg is fixing are developed over 10- 13 years (since HP lost visionaries William and Dave ) Give some time to Meg and HP will just do fine with 120B revenue.

Meg Whitman should be replaced. I say this as a long time consumer of HP products. HP should really take customer reviews to heart. While there have been some advances in technology, there have also been some compromises in production that will bite them very soon.

OK, HP already hired a Steve Jobs lieutenant. He was instrumental in creating the iPod. Left Apple to become chairman of Palm. How did that work out? Jon Rubinstein and Scott Forestall have complementary backgrounds, but your article is full of Alley Insider-level research, it’s hard to read. Meg Whitman is a tried and true CEO with a lot of experience, but needs time. She’s complicit in the Autonomy deal, but it’s different as a director vs. CEO. Disappointed in the article.

Completely agree if you think HP is a consumer only company. What would a former Apple exec, however good, know about Enterprise Storage or Systems Management software or corporate networking kit? HP first needs to decide whether it wants to be a Samsung/Apple/Lenovo competitor or go head to head with Cisco and IBM only then can it decide on a CEO.

HP needs to either divest the PC/Printer business and use the money to get serious about enterprise computing or vice-a-versa, it can’t do both! The parallels with IBM and the mid 90′s are scary, so this leads to one thought about a CEO = Lou Gerstner

As a current college student, I find it remarkable that you’ve fail to recognize or maybe failed to research Mrs.Whitman’s past merits and accomplishments. I don’t know Forstall and her past, and that is why I can not discredit her abilities; however, I do know what Meg has done, you know making a 7 million dollar company turn into a 4.4 billion dollar multinational company. I think it’s called eBay. Maybe you’ve heard of it Mr.Saintvilus. In any case do NOT count Whitman out. She’s very savvy and I would bet that HP will pop and be dominant like it once was.